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I'm Ari Paparo.I'm joined by Alan Chappell.And we're here to talk to Megan Gray.So, Alan, why don't you introduce Megan?
So in this episode we have megan is a tech lawyer with her own law and policy firm called grey matters it's headquartered in washington dc she focuses on information internet innovation and intangibles and serves as the advisory board for the electronic frontier foundation and the center for democracy and technology.
Earlier in her career, Megan was senior counsel at the Federal Trade Commission and general counsel of DuckDuckGo.Today, we're going to talk about a US federal law that seeks to ban TikTok from US app stores.
We covered this in our weekly newsletter a few weeks ago.Megan, thank you so much for being here.
Sure.Thank you for having me.I love talking about this topic.
It's fascinating.So let me set the stage here and I'll let you jump in and provide color commentary.So going back to 2017, TikTok was born when a Chinese company, ByteDance, bought their U.S.social app, Musical.ly.
And soon after purchasing Musical.ly, ByteDance had a little bit of a run-in with the FTC over some cop-out issues, some children-related issues.Can you just give us a little bit of background on that?
Well, I mean, it was – I actually don't know if it started prior to ByteDance buying Musical.ly.I think it did.Yeah.But by the time you had the resolution, the settlement, ByteDance was the owner.
So basically, there's a federal law called COPPA that regulates how you handle, process, delete children's information, personal information.And it can be very technical.There's a lot of bureaucracy, regulatory aspects to it, and they violated it.
And then that's sort of an endemic challenge, I think, for the social platforms, particularly those.I mean, they just have a way of sort of attracting kids.And so when you attract kids, COPPA usually comes calling eventually.
Well, if you don't practice good hygiene, and particularly for a lot of young, suddenly successful tech companies, they have not put together the right data legal regimes in place.So they end up getting slapped.
Yep.Well, okay.So we fast forward to 2020 during the Trump administration and the Trump had issued an executive order that effectively banned TikTok.And then that ban was challenged in court and what happened there?
Because it sounds like as we lead up to today that TikTok has sort of had a history of thorny issues with the government.
For sure.You know, interestingly, Trump actually issued two executive orders trying to ban TikTok.Apparently, he didn't think he covered enough ground with the first one.He also tried to ban WeChat and he tried to ban based on two
Executive branch legal authorities, one dealing with emergencies like in wartime and another one called which is.Often used for if a company is purchased in the united states by japan or saudi arabia or canada.
they have to consider SysVS review, which is we don't want to have a foreign country buying our oil pipelines, for example.
And here Trump put forward the SysVS regulatory regime as a basis for we don't want to have a Chinese company owning so much of a social media platform.
Those were challenged in court, those executive orders, and the courts determined up through appeal that that was excessive use of presidential authority.So that ended.
And then ultimately, once the presidency transferred to Biden, Biden continued within the executive branch to evaluate what Sisyphus could do in terms of putting some guardrails on TikTok.
and they reached a stalemate, kind of just sitting there trying to figure out what they were going to do next when, and I'm sure you're about to get into this, then Congress started moving on the ban that we're dealing with today.
Right.Well, right before the ban, though, there is this thing called Project Texas, where it seemed like TikTok had agreed to a whole bunch of additional vetting and scrutiny.And what happened there?
Why did Project Texas, like, why was that deemed insufficient?
We don't know.That was part of the negotiation between the Biden Sisyphus group and TikTok.
And Project Texas was a way to put guardrails on the fact that TikTok has a Chinese company owner, ByteDance, which is presumably controlled in some respect by the Chinese government, because that's how capitalism works there.
And Project Texas was to kind of outsource to Oracle, an American company, certain operations of TikTok, to put a firewall between ByteDance and what ByteDance could do to exfiltrate or infiltrate into the US company TikTok.
But for reasons that has never been fully explained, because it's national securities, yada, yada, there were people within the Biden administration that did not think that Project Texas was sufficient, even though it was pretty extensive, as far as I can tell.
And they have not explained why it is insufficient.
Isn't there some cloak and dagger here where we've heard that congressional sources have been enclosed to top secret meetings and they come out all white faced and shocked at what they've heard and immediately want to ban TikTok?
I know exactly the closed door meeting that you're talking about.And it's funny.It depends on whose characterization you listen to, because you also had people come out of that meeting going, where's the beef?
I don't understand how we are supposed to come out of this 20 minute meeting, 10 minutes of which were a congressional member asking about whether the Chinese government was poisoning his water and sending radio waves through his television set.
It's possible. how we're supposed to come out of that meeting and think that an entire media platform shouldn't be banned.And then other people come out of that meeting saying, oh my gosh, how could this possibly happen?
Let me ask, I like to play the dumb guy in this podcast compared to Alan, who knows who he's talking about.
My dumb guy approach is like when I was growing up, the communist Russian government, Soviet Union wasn't allowed to buy local newspapers or TV stations.
Well, that's not true.They were absolutely allowed to buy newspapers.
Newspapers, yes, but not television stations.
But not television stations.And people often say, well, then it's the exact same situation.But it's not because radio stations operate based on government-owned spectrum.
Yeah.And there's some similarities to that.But I think that
For better or worse, the way we've currently constructed things, social platforms are not subjected to the same set of rules as television stations and for that matter, newspapers in many regards.
We can have a whole separate pod on section 230 and immunity for platforms and maybe we will at one day.But I think the answer to your question is that as far as the law is concerned, those are separate things.
Yes, very separate.And we've had newspapers and magazines and brochures and all sorts of things for communication on on just like old fashioned mechanisms that have never been regulated.
That that is the premise of how this country started is that people can believe. and advocate for what they want people in America to believe.
That is the whole premise that we should not have a government act as a filter, as a sensor for saying, you need to check with me before you can read this brochure.
Okay, so now Congress has decided that there's a problem and I think it's – whether there's actual problem is probably a debatable point.
But there's enough momentum there that they decided there's a problem and we need to solve it and we're going to solve it with – I'm only going to say this once, the Protecting Americans from Foreign Adversary Controlled Applications Act.
The only time I'm ever going to say that.But they came up with the TikTok ban.Walk us through that.
Is that an interesting acronym?That's like PAFACA?Like, usually they have an acronym that spells something.
Yeah, they did it here.And, you know, it's interesting because we talk about Congress as if it's a single entity.And I don't think that's accurate.
There are many, probably majority of people in both the Senate and the House that did not want to pass legislation dealing with TikTok because it does raise a lot of thorny issues. And there's a lot of countervailing interests here.
For example, if you are in favor of diversifying the economic social media market, and you think Facebook is too dominant, then you might favor the presence of TikTok, even though it has a parent company that is based out of China.
It raises the First Amendment issues.It raises issues of reaching a younger generation, which is why you have Harris and Trump both with very active TikTok accounts now. So there's a lot of reasons why people in Congress didn't want to wade in here.
But there was one guy who really, really did in the House, and he formed a special committee within the House of Representatives to deal with the China threat as he posed it.
That congressman came in and basically threw what I would call some chicanery that is perfectly fine in a congressional setting, but came up with some interesting shenanigans to effectively cram this law through Congress.Then what happened?
He actually was not successful in cramming it through Congress.He was hitting all sorts of problems getting it through the House of Representatives.He couldn't find anybody to sponsor a companion bill in the Senate, and he was spinning out.
He was making no progress until it turns out that the Republicans, for their own reasons, were battling with Biden on passing a general government appropriations bill.It was hung up on funding for Israel and, most importantly, for Ukraine.
And into that area, this House of Representatives member said, hey, I've got a great idea.Why don't I try to attach this TikTok bill that doesn't seem to be going anywhere to a must pass law, which is government appropriations?
He threw that in there with the support of House leadership, thinking that that would result in a shutdown, a government shutdown. But Biden's foe said, hey, look, here's an idea.
We'll let you have your tick tock ban if you will allow the government to stay open and pass the Ukraine-Israel bill.And that got negotiated.
And ultimately, the law was passed and signed with gritted teeth by President Biden, who issued a press release about the funding, but made no mention about the tick tock ban.
And here we are with a law now on the books saying that TikTok either must divest to an appropriately qualified American company or it can no longer be in the app stores or be hosted by Oracle.
So neither presidential candidate wants to talk about this, right?
Well, actually, Trump wants to talk about it.He posted back in September and was also quoted in July saying that if you vote for him, he will save TikTok.
Now, there is an option to just not enforce this law, right?No, no.
That's why the Trump statement is so crazy.It's not like he has a choice.It is self-effectuating.There is nothing that a president can do to stop it from going into effect.
Because the guy in the House of Representatives that I keep referring to, he was well aware that whoever was going to be the next president, Trump or otherwise, was not a reliable ally on this particular issue.
So he didn't want to leave any discretion to the president on whether or not to enforce.
But isn't there a possibility they could find that they were in compliance and just – Yes, yes.
So the way that the self-effectuating law is structured is that TikTok has to divest to a quote-unquote qualified company. and qualified has a lot of description in the statute.
And the president gets to decide whether the company is qualified, so whether the divestiture is appropriate or not.And it is certainly possible that you could have a sham, an illusory divestiture. However, that's all the president does.
It's ultimately up to Oracle, Apple, and Google to decide whether or not they're going to play this game, subjecting themselves to billions of dollars of civil penalties if the president changes its mind or you have a different election.
that all the sudden they would be on the hook for billions of dollars a fine and i just have a very hard time imagining that any of these companies would be willing to risk that knowing that it's a sham divestiture.
So i think that meta or google should buy tiktok what do you think the chances of that getting through the current fdc is.
Well, we're not going to have the current FTC, right?We're going to have the ban or divest goes into effect January 20th.There'll be a new presidential administration at that point.
And really, we don't know even yet who's going to control the Senate.The Senate is who determines confirmation for political appointees, including at the FTC and DOJ antitrust. That is just up in the air.Nobody knows right now.
And whether your question of whether Meta, for example, could buy TikTok is going to depend on whether that would be approved by the FTC or DOJ.And we don't know who's going to be making those decisions yet.
Wait, January 20th.So like the new president's first day, they get they get sworn in.And before the inauguration balls start, it's like, hey, by the way, yeah, this is not even going to be the number one thing on their radar.
Right.That law will go into effect.And incidentally, the law allows the president to grant a three month extension of time.But only if there is a binding qualified divestiture
So, like, it requires them to run through a lot of hoops to even grant the extension of time.
Well, don't count Elon Musk out of this, because if Trump wins, he'll just give the spoils to whoever supported him, more or less.
That is true, but we're not sure if that's actually a spoil, right?Because the Chinese government has passed its own law saying any sale of an algorithm, the secret sauce here that really powers TikTok, cannot be a part of any divestiture.
So you would get TikTok, but perhaps not the most valuable parts of it.
And I also think, for example, if you were to have a Trump presidency, there's going to be a lot of back and forth on whether or not a Musk could be encouraged to buy Truth Social.So there's going to be a few social media platforms up in the air.
So I have some friends at TikTok, and I've told them this.I'm sort of surprised about how they're playing this.And I'm going to leave aside the court stuff, but more like the political angst.
Like if i was tick tock i would be using every bit of force that i had to make it very uncomfortable for either the harris or the trump campaign maybe less of the trump campaign cuz he's already committed to fixing it.
But it's weird, it doesn't feel like that groundswell of support for TikTok has quite emerged.And I'm curious, like, well, firstly, does anybody have any answer or any thoughts to why that is?
And then maybe open it up to like, how is TikTok playing this?And how could they be doing better?
TikTok didn't do that early on when this ban was suddenly moving very fast on the Hill.
And they got just beaten up black and blue by people in Congress for pulling out all the stops and having their creators, for example, go and picket and petition the various people in Congress.So I think as a result of that blowback, TikTok has
re-strategized on what the best approach is, that embarrassing public pressure campaigns are not the best way to go forward with trying to get people to change their mind.But more importantly, what do you expect Congress to do at this point?
Do you think Congress is going to pass a pro-TikTok ban reversal?They can barely pass a budget.I don't think this is going to happen in Congress.
So it doesn't surprise me that TikTok has been, as far as we can see, fairly quiet in lobbying because there's not much possibility of that moving forward.
I think TikTok has put all of the eggs in the only basket that they have available to them right now, which is the courts.
So how's that going?What's the state of the case?Not going great.
It was very unfortunate.Judges are assigned randomly to every case, and TikTok got a bad random assignment.They got two
They got one MAGA judge, they got one very old Republican judge, and they got the chief judge, who was appointed by a Democrat and is fairly even-keeled here, but would still be outvoted two to one.
And going to the oral argument as I did, I walked out there a little shell-shocked at how little, I think, consideration there was of what are pretty strong meritorious arguments from TikTok.That oral argument was China, China, China.
It was just, it was crazy bad for TikTok.And it doesn't get better from there, because even if TikTok loses there and goes to the Supreme Court, the current constitution of our Supreme Court doesn't look great for TikTok.
Right.But isn't the Supreme Court very pro-business and anti-regulation?
Yeah, but not pro-Chinese business, which is how everybody seems to be viewing TikTok in the courts right now. It is orthodoxy in the Republican Party to be very, very rabid on China as a national security threat.
And the Democrats, even to the extent that they recognize that that's perhaps not entirely true, do not want to be in a position of defending China.
Yeah, the Democrats aren't pro-China.They're just pro-reason and rule of law.
I agree.But it's like being in favor of criminal reform.Like, it's very difficult to walk that line.And the Democrats are very careful on that.So anybody want to make a prediction?
Because it does not sound great for TikTok right now.Things are not looking good.But does anybody want to make a prediction whether or not TikTok will ultimately be banned?
I have done quite a bit of thinking about that and I do have a prediction.I think TikTok will be banned.And I struggle with that because I don't think that accords with US legal precedent.I don't think it's a good path forward for business.
And I don't even think it's a good outcome for national security reasons. And in trying to map this out, because I've been mystified by the fact that TikTok is apparently not making any preparations.
The fact that TikTok is hiring at a crazy, mad pace right now. Like, that does not seem consistent with my prediction, right?And so I've had to keep going back, like, what am I missing?Maybe they've got some sort of secret plan here.
Maybe they've got a handshake deal with Trump and Harris. But the more I look at it, I'm like, I just don't see an out.I don't see a way forward here.They could do a sham divestiture.But for the reasons I explained earlier, that doesn't seem likely.
TikTok was banned in India.And when that happened, they just pulled out.That was just the end of it.And they don't operate in India anymore.And so maybe that's their plan here, which doesn't make a lot of sense to me.
Because I've always thought that for an online platform, the United States is where the money's made, that these are the richest people, the most online, but that seems to be the ultimate outcome.
I would like to say, though, that what this TikTok ban does is it only requires Google and Apple to drop TikTok from the app stores, and it requires Oracle as a U.S.company to not host them.
It is very possible that you can have a situation where none of that matters.You can continue to sideload.You can still have the website operating.You could have TikTok move to Canada and be hosted by a company out of Ireland.
Maybe this is all for naught, but I would have anticipated if that was TikTok's plan, we would have gotten some inkling of this, like them negotiating with a different hosting company.I haven't heard anything along those lines.
Yeah, I just wonder if they're waiting for the dust to settle after the election and then figure out exactly which buttons they want to push.
But I like the sideloading option and I think there will – my prediction is some variant of that is going to happen and the TikTok, for all intents and purposes, is going to remain in the US.
Alternatively, I heard a very strong rumor, and I don't like to engage in rumors on this show, but I heard that Markitecture might be purchasing deals.
You know, all I can say is, in the club, we'll all fam.Sorry, you guys obviously are not TikTok users.That's the current. The current phrase du jour.
Well, you know, the other aspect, too, is the one thing that you can count on is that at least for the foreseeable future, we are going to continue having problems funding the government.
So the idea of Congress passing a reversal ban, if somebody in Congress wants to stand up to defend TikTok, maybe you could get a reversal ban that way.
So I'm a cynic, so I think sort of what I said earlier, which is Harris wins, it's banned.Trump wins, we have crony capitalism, and it gets shoved into one of his donors' pockets.
So one of the implications that we're seeing already with this whole situation is I'm hearing this from my friends at TikTok is like the salespeople at Meta and other large platforms and they're on their ad side are saying, hey, you know, you might not want to put all your ad dollars into TikTok anymore because they might not be around anymore.
And so they're playing the FUD card.So that's certainly one of the implications, but I'd love both of your takes on like what are the other implications of all this? Because we're kind of messing with the rule of law here, Megan.
I'm well aware.I think the implications are pretty horrific.The idea that anytime you can paint somebody with a foreign brush, like you are an Israeli company because your owner is Israeli or because your CEO
has dual citizenship in Russia, or anytime we're going to make someone else the other, right?This is foundationally the problem that we have with partisan politics right now, is that you're either on my team or you are
a complete insect that should be squashed.And I think the idea of characterizing TikTok as just unadorned evil and a tool of the Chinese government is one, not only inaccurate, but I think it
makes it difficult to have conversations about how we actually should regulate social media.
And what I find really fascinating is that a lot of the arguments being made with respect to TikTok are almost identical to the arguments that have been made over the last 10 years with respect to the US tech companies in context with, you know, from the EU Commission and other folks in the EU.
And I would be very wary if I were the US, if I ran things in the US, I'd be very wary of effectively creating a trade war.
Because if you start to close down cross-border data transfers, you sort of embolden the folks within Europe who have been clamoring to do that to the US.And so, bring this back to like, okay, the market takes your audience, how does this impact me?
Like, if you're looking to close a big deal that involves the transfer of European data into the US, and if you're in the ad tech and you're working in Europe, that's inevitably the case, you could have a situation where this blows up those data transfers.
And like, I've been on calls with clients where they have a large EU-based advertiser who is jumping up and down and saying, listen, there's too much uncertainty here.We can't even move forward with this deal.
Absolutely.And there's a similar aspect of that, which is the splinter net.
If you're going to have different regulatory regimes depending on whether you're in Europe or India or the United States, that means that ultimately the only companies that can operate in any truly successful way on the internet are large companies because they are the only ones that can pivot and have different operations the way that's necessary to operate in the internet.
You know, but on that point, I think most people perceive that Facebook, Google, et cetera, are on the sidelines, just passively watching whether or not the ban will go into effect.I don't think that's true at all.
I think they recognize that this would be a huge boon for their business.And they have proxies that are actively currying this anti-Chinese sentiment.
Yeah, but if you look at what's going on in Europe from a business perspective, the big tech giants aren't being banned, but they're certainly being hindered.
And you have to imagine inside Meta, they don't see the future of growth in Europe as even a possibility, I think, given that they aren't even rolling out their AI products and they're quite limited in what they're able to do nowadays in Europe.
Well, I almost think that's separate though.I mean, there's sort of like the bureaucratic hassle of being in Europe at all and then there's the additional wrinkles if you happen to be meta or some other large company.
But I'm saying like if you're the director of sales at some MarTech company and all of a sudden, they close down EU data transfers, that's going to impact you directly and that's sort of already happened at least twice in the last 10 years.
privacy shield and shrimps and all these people.It's absolutely.
But, you know, the interesting thing, though, that I keep asking folks about and I still haven't gotten a satisfactory answer is that if, in fact, TikTok is a Chinese government stalking horse, why is it OK in Europe?
The best answer I've gotten is that, you know, oh, Europe is corrupt and beholden to China.And I'm like, really?That's our theory for why?It makes no sense.
My take is they just love going after the Americans and the Chinese are less important.Do you think we could get Shrems on the show?I picture him as sort of like the sprocket guys from SNL.
I love him.He's a great speaker.
I don't know anything about him except his name on the lawsuits.Yeah, we should try to get him on.I think it's time to wrap this up.This was an amazing conversation.We didn't get to Megan's secret sport.What was that about?
Well, it's not a secret and perhaps isn't that well known, but I play roller derby.
I'm speechless.I don't know what to say.That was not what I was expecting.That's the best mic drop we're going to have.
Ari, what were you expecting?
Well, we have got curling.I was thinking, I don't know, like croquette or something.
I don't know.I think I joined roller derby primarily because I just thought of a great roller derby name.Yeah.
Oh, that's awesome.What's the what's your crew's name?What's it?What's your team's name?
It's just the D.C.roller derby team.
OK.Usually they have cool.I know.So Sue me is pretty awesome.All right.This was a great conversation.We have more episodes coming of the Monopoly report.
Please make sure to subscribe on Spotify, Apple, YouTube or wherever you like to listen to your podcasts.Megan, thank you so much for being here.
And Alan, always fun to talk.
A great time, Ari.Thanks, Megan.Thanks.
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